WASHINGTON, U.S. - Commenting on the Israeli settlements, the U.S. President Donald Trump said in an interview with an Israeli newspaper that the settlements were complicating the peace process.

Stressing that he did not believe the Palestinians, and possibly Israel as well, were ready to make peace, he urged the Israeli government deal with the issue of settlements carefully.

In December last year, Trump endorsed Israel’s claim to Jerusalem as its capital, breaking with decades of U.S. policy that the city’s status must be decided in negotiations with the Palestinians.

Israel views Jerusalem as its unified capital, while the Palestinians demand east Jerusalem - captured by Israel in a 1967 war and annexed in a move not recognized internationally - as the capital of their future state.

Trump’s decision not only angered Palestinians, but sparked uneasiness and violence among Arab nations with the region witnessing protests that lasted several days.

However, Trump, who has described his Jerusalem move as a "high point" of his first year in office, even threatened to withhold aid unless Palestinians agreed to talks.

Palestinians, led by their President Mahmoud Abbas, meanwhile started looking at additional world powers as potential mediators.

On Friday, Trump told Israel that it would need to make "significant compromises" for peace with the Palestinians.

Trump told the conservative Israel Hayom daily, in remarks published in Hebrew, “I wanted to make clear that Jerusalem is the capital of Israel. Regarding specific borders, I will grant my support to what the two sides agree between themselves.”

He added, “I think that both sides will have to make significant compromises in order for achieving a peace deal to be possible.”

Trump’s statement comes at a time when fresh strains between the Palestinians and the U.S. ambassador to Israel, David Friedman, have emerged, following the killing by a Palestinian of a Jewish settler.

Following the settler’s stabbing, Friedman tweeted that he had previously donated an ambulance to the slain man's community and that he was praying for the next-of-kin.

He also added, "Palestinian 'leaders' have praised the killer."

However, the Palestinian administration thrashed the statement made by him, with Nabil Abu Rdainah, a spokesman for President Mahmoud Abbas saying in a statement, "The American ambassador's statements make us wonder about his relationship with the occupation. Is he representing America or Israel? Friedman's recommendations and advice, which do not aim to achieve a just peace on the basis of international legitimacy, are what led to this crisis in American-Palestinian relations.”

While most world powers deem Israel's Jewish settlements as illegal, the Trump administration has taken a softer tack.

Further, Abbas criticized Trump for his decision following the controversy and said the U.S. has disqualified itself from being an "honest broker" in the Middle East peace process.

In his interview published on Sunday, Trump commented on whether the U.S. would present its peace plan saying, "We will see what happens. Right now the Palestinians are not into making peace, they are just not into it. Regarding Israel, I am not certain it, too, is interested in making peace so we will just need to wait and see what happens."

Answering a question on whether Israeli settlements would form part of the peace plan, Trump said, "We will be talking about settlements. The settlements are something that very much complicates and always have complicated making peace, so I think Israel has to be very careful with the settlements."

Currently, over 600,000 Jews live in about 140 settlements built since Israel's 1967 occupation of the West Bank and East Jerusalem.